An Industry in Trouble

After four years of stupendous growth, farmers
are expected to reduce their planting of genetically engineered seeds
by as much as 25 percent in 2000. With a growing number of food
manufacturers and grocery chains in Europe taking products containing
genetically engineered food off the shelves, the market for these crops
has been shrinking. American exports of soybeans to the European Union
plummeted from 11 million tons in 1998 to 6 million tons last year,
while American corn shipped to Europe dropped from 2 million tons in
1998 to 137,000 tons last year: a combined loss of nearly $1 billion in
sales for US agriculture.

Most major food companies have already
announced that they will avoid genetically engineered ingredients in
their products for the European market. But recent surveys indicate
that consumer tastes are souring on the other side of the Atlantic as
well. Gerber, Frito-Lay, and natural food retailers Wild Oats and Whole
Foods have said that they will avoid genetically engineered ingredients
in their products sold in the US.

Top commodity handlers, such
as Archer Daniels Midland and A.E. Staley, have begun to discount
genetically engineered crops because of the greater financial risk.
Commodity traders have followed suit fearing the loss of export markets
as Japan, South Korea, Australia, Mexico, members of the European
Union, and others draft laws requiring mandatory labeling of foods
containing genetically engineered ingredients.

Investors have
reacted harshly to the growing consumer rejection of genetically
engineered food. In May of 1999, Europe's largest bank, Deutsche Bank,
recommended that investors sell all holdings in companies involved in
genetic engineering, declaring that “GMO's [genetically modified
organisms] are dead.”

Share prices for biotech seed companies
that were Wall Street's darlings a few years ago are sinking towards
all-time lows. Investors in Monsanto have watched the corporation's
share price lose nearly one-third of its value in the last year.
Brokerage houses have been advising major players in the biotech
industry to spin off their ailing agricultural divisions. Novartis and
AstraZeneca both followed this advice in December of 1999. And
struggling to recoup nearly $8 billion in seed company and agricultural
biotechnology investments, Monsanto merged with pharmaceutical and
chemical giant Pharmacia Upjohn at the end of 1999. The new firm
quickly decided to turn Monsanto's agricultural unit into a separate
company.

In December, a group of high-profile lawyers filed a
class-action lawsuit against Monsanto on behalf of American soy
farmers, charging that the company had not conducted adequate safety
testing of engineered crops prior to release and that the company has
tried to monopolize the American seed industry.

Further
complicating the financial picture are concerns about uninsured
liabilities for farmers and agribusiness companies. In November 1999,
30 farm groups, including the National Family Farm Coalition and the
American Corn Growers Association, warned American farmers that
“inadequate testing of gene-altered seeds could make farmers vulnerable
to ‘massive liability' from damage caused by genetic drift – the
spreading of biologically modified pollens – and other
environmental effects.”

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